ABSTRACT
Microeconomic processes are closely related to macroeconomic equilibria. Egalitarian distributions of income have a positive effect on innovation-oriented and competitive behaviour among those in control of economic surplus. The controversy between labour value or utility-based price formation is of little relevance here. Abstract labour is labour spent on useful products. It is spent only on those products which sell not because they are useful, but because they are scarce and require labour for their production. Rising mass incomes promote price and income elasticity of products. This induces producers to compete. In an effort to increase sales, they lower prices to the levels of their costs plus average profit. The classical and Marxist formulations of price formation imply that surplus other than profit is as limited as possible. This implies the reduction of surplus in the hands of the wealthy to fit with profit appropriated under conditions of competition.
However, high levels of employment (that is, rising mass incomes) are at the basis of a much more important mechanism at the level of microeconomics. This mechanism consists in the convergence of productivities. This occurs despite extremely different growth rates of physical productivities in different production lines. Productivities’ convergence is at the basis of the flexibility of capitalism, and ultimately of its economic cohesion. Indeed, the conventional behaviours and structures of capitalist systems are conceivable only if these high levels of employment and other factors of production are realised. The controversy among different schools of economics generally concerns the capacities of microeconomic mechanisms to produce full employment through their own independent dynamism. However, microeconomics does not determine macroeconomics. On the contrary, macroeconomic equilibria enable microeconomic mechanisms to operate.
